TOA,
You say count you in the camp that likes stock splits. But is your liking them based on anything substantive?
I stated in my last post that:
"We should not attribute any rational thinking at all to stock splits.
It's simply a matter of investor sentiment."
So no, I don't have anything substantive to use in the discussion.
I also stated:
"Whether they in fact do increase the long term value of ones investment is difficult to argue, because most companies routinely execute them."
Now you indicate that you reviewed some academic research that proves stock splits are irrelevant. I would love to peruse the information if you can provide the source.
You state:
Sure stocks that split a lot do better, but correlation is not causation.
I simply believe that growth companies, that grow earnings consistently, cause the stock prices to rise. I further believe that if the company regularly splits the shares to keep the share price at a level that a novice investor believes it to be a "bargain", more investors will invest in the company.
Let's use my previous example, BRK.A, and compare it to MSFT.
BRK.A is a seven bagger since Jan. 1990. MSFT is an 83 bagger in the same period of time.
Would you buy one share of BRK.A or 50,000 shares of MSFT tomorrow, if you had that choice?
Now, again, you state that you have reviewed academic research that disputes the long term value of stock splits to an individual investor. How would one go about evaluating whether or not MSFT, or any other company would have performed
better if the shares had never split? What would one use for comparison? It would seem to me that you would have to have several identical groups of companies. Some which had split, and some which had not. Again, I am interested in finding the source of your reports.
I will look forward to your answer.
Phil |
